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Stifel To Wingstop Investors: 'Get Ready To Wing It'

Restaurant chain Wingstop Inc (NASDAQ: WING) could be on the cusp of a "virtuous cycle" of gaining brand awareness and investors should "get ready to wing it," according to Stifel.

The Analyst

Stifel's Chris O'Cull upgraded Wingstop from Hold to Buy with a price target lifted from $80 to $92.

The Thesis

Wingstop's 12-week TV campaign that ended in May could have positively impacted second-quarter same-restaurant sales metrics, O'Cull wrote in the note. First-hand channel checks suggest the ad campaign was the "primary impetus" behind an acceleration in same-restaurant sales. Other factors may have also contributed to favorable sales trends, including expanding delivery service.

The research firm expects same-restaurant sales to come in at 9 percent versus the Street's estimate of 7.5 percent. The momentum could carry over into 2020 if a new 12-week advertising campaign in August results in similar sales benefits.

Meanwhile, Wingstop's franchise disclosure document points to 146 domestic franchise openings in 2019, which implies a year-over-year unit growth rate of 13 percent. Outside of the U.S., the company is likely to confirm new master franchise agreements, perhaps in Asian markets like Indonesia, Singapore and Malaysia.

Finally, the research firm conducted a new consumer survey which found the percentage of respondents who had never eaten at a Wingstop fell from 49 percent 18 months ago to 39 percent.

Price Action

Shares of Wingstop were trading higher by 2.6 percent at $83.31 Tuesday afternoon.